All Forum Posts by: Benjamin Emery

@Account Closed: Can you share any lender names? Also have the same question but finidng it difficult to find any lender offering HELOCs on investment properties.

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San Luis Obispo, California

@Elenis Camargo Just wanted to let you know that I spoke with Pentegon Federal Credit Union this morning and although they used to offer HELOCs for investment properties, I was informed that they do not anymore.

I too am searching for a lender that will allow me to access equity on investment my properties. I'll check out TD Bank though.

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Quote from @Robin Simon:

Quote from @Isaiah Thelwell:

Hello, i've been hearing different investors talk about a seasoning period when refinancing out of hard money during the BRRRR process. can anyone help me dive a little deeper on what this is/mean?

Yes - seasoning refers to the ownership period (in months) between the purchase and the refinance. Check out this recent BP article on BRRRR seasoning that dives exactly into your question!

https://www.biggerpockets.com/blog/brrrr-loans-what-are-the-...

Refinancing: Conventional or Portfolio Lenders vs. DSCR

There are multiple considerations to optimize the refinancing portion of the BRRRR method. Generally, for the optimal refinance, these are top of mind for BRRRR strategy investors:

Return of capital: The key "secret sauce" of the BRRRR method is to build portfolios using the same capital over and over—which relies on getting your basis (or more) back on the refinance, where basis refers to the money you invested in the property (down payment and cash used for renovations).
Speed: Refinance lenders use the term “seasoning” to refer to the amount of time (typically in months) between the purchase of the property and the refinance. Velocity of money, or speed in which you can complete a BRRRR investment and repeat, is key to success, and refinancing with the shortest seasoning requirements is highly important.
Loan terms and interest: Cash flow is also an important consideration for a refinanced rental property, so attaining a low interest rate, as well as other aspects of loan structure (term, amortization, or interest only, etc.), plays a big role.

Generally, there are three main refinance options for BRRRR method investors:

Conventional loans
Bank/credit union loans
DSCR loans

Conventional loans are generally defined as loans originated under GSE (Fannie Mae/Freddie Mac) rules and guidelines and securitized. Bank and credit union loans are generally defined as “portfolio lenders,” or lenders that hold the loans on their balance sheets. DSCR loans are loans issued by private lenders with proprietary and differentiated rules and guidelines and are typically included in “non-QM” securitizations.

The advantage of conventional refinance loans is that they typically have the lowest interest rates and fees. However, BRRRR method investors have run into a lot of trouble using conventional loans for refinances for multiple reasons, especially in 2023.

One issue is the challenge of qualifying, as conventional loans will have DTI requirements, income requirements, loan size limits, and loan amount limits that investors looking to scale a portfolio run into as soon as the financial freedom snowball starts rolling. But most importantly, in April 2023, Fannie Mae changed cash-out refinance seasoning requirements from six months to a full year. This is hugely problematic for the "speed" aspect of BRRRR investing—drastically slowing down the returns and velocity of capital for BRRRR investors using conventional loans.

Portfolio lenders are another option, and they typically offer competitive rates and fees as well. Banks and credit unions can also offer flexibility for investors that engage in strong relationship-building strategies, offering discounts and solid loans in exchange for borrowers willing to use the institution for other purposes (savings accounts, etc.). However, downsides include regulatory restrictions on bank lending, many institutions that restrict concentration and geographies, and other headaches and issues that arise when dealing with a slower-moving bank.

DSCR loans are the option that has completely changed the BRRRR lending landscape in the last few years. While DSCR loans tend to have interest rates a bit higher (generally 0.75% to 1%) than the other two options, which can challenge cash flow, this comes with some advantages that are uniquely suited to the BRRRR method. These advantages of using DSCR loans for refinances using the BRRRR method include:

More flexible seasoning requirements: As of April 2023, the seasoning requirements for conventional cash-out refinances is now 12 months, but many DSCR lenders are still at just six months (with some even as little as three). Additionally, for rate-term refinances, many DSCR lenders have no seasoning requirements at all.
Easier qualification: DSCR lenders have much lighter qualification requirements than conventional or portfolio lenders, such as no DTI, income verification, or tax return hurdles that can slow down or disqualify loans
Flexibility: While conventional and bank lenders are heavily regulated and follow standardized rules, DSCR lenders have much more flexibility and control over their guidelines. This allows DSCR loans to be more adaptable to the market as real estate investing strategies change, including the BRRRR method. Some examples of this include being able to embrace the "AirBnBRRRR" strategy (i.e., not requiring a long-term lease for the "rent" portion of BRRRR before approving the refinance) or allowing investors to borrow in an LLC or other creative structures.

Hi Robin,

Thank you for your post as this is directly applicable to my situation. I'm currently about to close on a wholsale deal for $222k, purchased with an 0% down HML loan (using other propteries at collatoral) and the plan was to rehab, refinance out of it but the lender requires 20% down to refinance and so we feel our only option is to just flip once renovated. We'd love to figure out a way to keep it and I just read your post on DSCR rate and term immediate refinance. My question is: can you reccomend a lender that provides a rate and term DSCR refinance with no seasoning requirement?

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Boston, Massachusetts

@Luka Milicevic Thank you for your comment. My agent is in fact the buyer agent and the seller agent for the property. It's technically legal in Washington State but most real estate agents won't provide dual agency for obvious liability reasons but I always ask when submitting an offer through the MLS, although I never want to endanger the agent or request favorability in any way.

Sounds like I need a stronger resume to receive a HML or to piggyback off of @Rob Beeman, if I can find a great deal where the rehab can be completed within 65% of the ARV then it seems lower risk. Man I freakin love this stuff.

1 Vote

Seattle, Washington

@Rob Beeman Great explanation, thank you for the thoughtful comment and example. May I ask which lender you used for this scenario?

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Seattle, Washington

Quote from @Bob Stevens:

Quote from @Benjamin Emery:

Hi BP Crew,

First time caller, long time listener and new BP member here.

The backstory: I have submitted an offer on a rehab through the MLS that my buyer agent (who is also the sellers agent btw) says the owner will most likely take the offer. Once accepted, I've been planning on assigning the contract but my cash buyer doesn't like the deal as much as I do. I personally love the deal and I'm considering taking on the project myself.

My question to the community is:

Is there a way to borrow hard money without a downpayment? From the information I've gathered, most hard money lenders require a downpayment of up to 30% of purchase price. Any advice would be much appreciated.

Sorry no. They are all going to want you to have skin in the game. If your experienced buyer doesn't like it , why do you think its a good deal? You better know your numbers.

Hi Bob,

Thanks for the response. I'm a residential architect and work with contractors often. I've been house hacking my personal residence for a future BRRRR and definitely have a lot to learn especially about renovating / wholesaling but this residence is a single floor 2bed/1bath, 900 sq home and pretty easy to asses imo. It's also my first deal so I maybe I got something wrong.

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Seattle, Washington

Hi BP Crew,

First time caller, long time listener and new BP member here.

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Seattle, Washington

Hi Kaitlyn,

Congrats on the membership! Sounds like you're on the right track. I found

book highly informative and straight to the point. Only a 3 hr audio book and it explains a lot in a short amount of time although for you, there would still be some overlap from your current profession.

I too am interested in wholesaling and as an architect in Seattle I plan to use it as a vehicle to network, fund my next purchase and make some friends in the industry.

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Seattle, Washington

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $415,000
Cash invested: $80,000

Still living in and renovating. We plan to be finished by the end of August 2023

What made you interested in investing in this type of deal?

This property has a separate upper and lower level, detached garage and shed which will soon be an office.
The potential was enormous on this property and the right price.

How did you find this deal and how did you negotiate it?

Found on Flyhomes website. Through flyhomes we were able to buy a home with a cash offer on their behalf for $415k even though the owner had another offer on the table @ $450K. Luckily, they still chose us because it was cash.

How did you finance this deal?

Through Flyhomes. They offer cash offers as a double close deal. Extra fees will be associated with it, but cash is king.

How did you add value to the deal?

We rehabilitated 2 kitchens with new applicances, 2 bathrooms, removed old oil chimney, new siding, landscape, turned our shed into an office, added egress windows to two bedrooms in the basement, added 200amp power instead of the outdated 60amp while separated the supply into two panels for upper and lower floor, modified threshold openings to make larger to allow more light, new doors, new fence.

What was the outcome?

We are still in the process. We're planning on being finished by the end of summer 2023

Lessons learned? Challenges?

Before purchasing our next home, if the electricity is old, I would get an electrician to look before purchasing to make sure it's up to code. This was a mistake the inspector didn't catch. The electrical supply drop was an outdated 60amp when the panel was listed as 200amp. We still haven't fixed this yet, but we received one quote for $30k and one for $8k and $6k.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Flyhomes is great if you know what you want. Don't expect the person showing the home to have any knowledge about anything really. They are considered the uber of real estate agents meaning you can usually receive a tour of the home the same day you request it. Cash offer for 5% down is a big carrot on the end of the stick.

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All Forum Posts by: Benjamin Emery

Benjamin Emery has started 2 posts and replied 9 times.

Post: Investment Property HELOC

Post: Heloc On Investment Property???

Post: Seasoning periods for Refinance?

Refinancing: Conventional or Portfolio Lenders vs. DSCR

Post: Hard money lending without down payment?

Post: Hard money lending without down payment?

Post: Hard money lending without down payment?

Post: Hard money lending without down payment?

Post: Wholesaling Contract Help

Post: Live and fix first BRRRR home